WIN!
Join our Facebook Group
to enter our monthly draw

Property Investment Overseas

French fantasy

Viewing property in France is likely to bring on a severe dose of romanticism. It’s not just the charm of the buildings (beguiling stone farmhouses with faded blue shutters, elegant manoirs set amid vineyards…) but also the appeal of the French art de vivre (way of life): the markets, the food and wine, and those villages rooted centuries deep in history.
But before Francophile fever gets a grip, it makes sound sense to ask how the property market is faring during what the French refer to as ‘la crise’. The comforting answer is: considerably better than the US or the UK. Like South Africa, France is a model of fiscal rectitude where banks’ lending policy is concerned, so the market there hasn’t been hit by the boom-and-bust experience.

Historically, the country has had stable prices, with increases in line with inflation. According to the French National Association of Estate Agents (Fédération Nationale de l’Immobilièr, or FNAIM), property prices only declined by 2,5 per cent (apartments by 0,8 per cent and houses by 4,2 per cent) last year, compared with an average increase of 3,8 per cent the previous year. However, prices for the types of property favoured by overseas buyers have dropped much more sharply, in some cases by as much as 20 per cent. Although the country has a high level of public debt, private households are less indebted, helped by the French habit of petites épargnes (saving for a rainy day). French property is now attracting many queries – the FNAIM reports a 63 per cent increase in the level of enquiries in the October 2008–January 2009 period compared with the previous year, with 23 per cent of enquiries coming from investors.
France is not a speculative market, such as Dubai or the UK, and French property legislation does not encourage speculation. The French take a long-term view of property investment, and the cost of buying is high (seven to 10 per cent of the asking price). ‘You are buying a lifestyle,’ explains Bruce Marvin, a specialist in locating prime overseas property, when clients ask him if buying in France is a good investment. ‘And if you can make some money in addition, that’s a bonus.’

Deciding what type of property to buy in France depends on what you have in mind. For a sunshine retreat combined with some rental income, the South of France may be the best bet. If you want an undiscovered area where below-average prices may rise, then somewhere like the Auvergne may be the answer. And for return on investment, the government-supported leaseback scheme has plenty to recommend it.

Given the drop in property prices by between 20 and 30 per cent in areas popular with overseas buyers, it’s a good time to think about buying there now. French property represents remarkably good value compared with the UK, where similar homes are at least double in price. Prices vary markedly according to region: an FNAIM 2008 report on average prices per square metre shows Provence-Alpes-Côtes d’Azur as the dearest at €3 341, followed by Languedoc-Roussillon (€2 163), with la Champagne and Auvergne (€1 586) and Limousin (€1 454) at the lower end of the scale, where it’s still possible to find a property that offers an enviable lifestyle for as little as €250 000 and a pied-à-terre for much less. The price of property in or near big cities will always be higher, and you get more for your money from older properties than from a new build.

Like any other market, France has its property hotspots. ‘If you have big money, then head for Provence,’ says Bruce. ‘It appeals to anyone who wants to have that “Côte d’Azur” experience. You can expect to pay €700 000 to €800 000 for a two- or three-bedroom property near the coast.’ He also recommends the Loire Valley, as the chateau-studded countryside is within easy reach of the British and Dutch markets, while the French Alps offer the advantage of a dual season, given how popular skiing is in winter. There, prices start from €600 000 for a four-bedroom chalet.

The leaseback system, introduced 20 years ago by the French Government, was designed to encourage quality developments, such as tourist complexes, retirement homes and student accommodation. Among the advantages of this system are guaranteed rental returns, 19,6 per cent VAT rebates (developers are now starting to offer these up front, so that the initial down payment may be as little as six per cent), fully managed properties and long-term capital growth.

St Clair, Cap d’Agde Languedoc, a three-star marina-side development with a pool, gym and spa, is an example of the kind of opportunity on offer. It’s on the books of French Property Investment (FPI), a family-run agency with South African connections that is based in South West France. Prices for properties bought off-plan start at €80 000 for a studio apartment and go up to €160 000. ‘At peak holiday times, the management company is able to offer maximum income,’ says Louise Cheesebrough of FPI. Return on investment of between 3,5 per cent and five per cent is projected. The scheme also gives owners use of accommodation within the complex at €50 per week for up to 12 weeks a year. ‘It’s an exciting long-term, low-hassle investment that produces income and pays for itself,’ says Louise.

On the residential side, FPI specialises in the area around Pau in Aquitaine, which is relatively undiscovered. It has plenty to offer South Africans, from surfing on the Atlantic Coast and skiing in the Pyrenees to meeting players from top French rugby teams, like Bayonne, which is based there. Prices for properties on FPI’s books range from €200 000 for a watermill that has business potential but is in need of TLC, to a stunning 12th-century equestrian property where the Emperor Napoléon and Eugénie once stayed. The latter boasts stabling for 80 horses and is going for €4,5-million.

Bruce sounds a note of caution about French rural holiday homes (gîtes): ‘There’s a romantic notion around them,’ he says, ‘but there are probably more gîtes than there are people who want to go and stay in them. People have the idea that they can buy a property, do it up and earn a good living, but it isn’t that easy; you’ll only earn pocket money.’ In the current market, owners are only like to get lets for six to eight weeks a year during school holidays, and there are so many non-nationals with buy-to-let gîtes that this market is oversupplied.

Carl Scholfield of Lafite Scholfield Belles Demeures, an agency specialising in South West France in an area from Lot to Pyrénées-Atlantique, says, ‘This is a very French world where you’ll become part of the community – it’s not an ex-pat ghetto.’ The agricultural zone has a low population, and the most sought-after properties there are stone country houses with sizeable grounds that are close to villages and whose prices are reasonable compared with coastal resorts. Prices rose by 10 per cent to 14 per cent between 2002 and 2007. ‘Prices have slowed by an average of six per cent per annum, compared with 25 per cent elsewhere in Europe,’ says Carl. ‘This year it may be five per cent, with an expectation of return to growth. In fact, now is an excellent time to buy in the area, as prices reflect the lack of volume and good properties are to be had for good prices.’ On Lafite’s books is a restored two-bedroom Beauville property that is several hundred years old. Priced at €170 000, it is situated on the ramparts of a bastide village and offers stunning views. Lafite is also selling a €455 000 renovated stone house on the River Lot featuring four double bedrooms, a pool and two acres (just under two hectares) of ground.

Owning a pied-à-terre in Paris isn’t just a delightfully decadent dream – the stability of Paris prices plus rental demand makes an apartment there a good investment. ‘Paris is one of the most secure markets in the world,’ says Matthieu Cany, MD of Sextant Properties, estate agents with 160 branches throughout France. He points out that although prices dropped slightly in Paris (€6 283/m2 currently, compared with €6 362 in the second quarter of 2008), rentals, according to FINAM, continue to increase, and did so by 4,3 per cent in 2008. ‘The best area to invest in will always be central Paris,’ says Matthieu.

Yolanda McCafferty of Vivre à Paris, an agency specialising in buy-to-let for vacation rentals in the Marais district, agrees. She points out an appreciation rate of 65 per cent over the last five years. ‘It’s a better place to put your money than any fund,’ she says. The Marais, near the Pompidou Centre, the Picasso Museum and Notre Dame, is perfectly placed for tourism. Yolanda, a Philadelphia ex-pat, says prices start at about €200 000 for a 25m2 studio apartment, €400 000 for a one-bedroom unit and €550 000 for two-bedroom apartments in need of refurbishment. Vivre à Paris offer an armchair service for investors: they source English-speaking plumbers, architects (expect to pay €1 000/m2 for renovations) and similar artisans, and manage the lettings. They have 120 furnished apartments for short- and long-term lets on their books. Rental yields for holiday lets are between five and six per cent (even as much as eight or nine per cent, in some cases. Currently on Yolanda’s books is a €550 000 south-facing one-bedroom apartment with exposed beams and parquet flooring. Situated near the Hotel de Ville, the property generates a rental of €135 per night.

Within the central area, the Sixth Arrondissement is the most expensive at €9 790/m2. At €5 050, the Buttes Chaumont is the least expensive. ‘It’s a good time to buy property and rental demand is strong,’ says Matthieu. He adds that high yields can’t be expected on buy-and-leaseback properties, whose typical returns are 4,21 per cent – the reward has been in capital growth, which averaged 63 per cent over the last five years. Typical of a business leaseback opportunity on Sextant’s books is a fully furnished €248 000, 25m2 studio apartment near the Bastille-le Marais Metro.

Paris is currently attracting a renewed level of interest from potential investors from overseas, including SA. ‘We’ve had a number of enquiries from South Africa,’ confirms Gail Derreaux of FrenchEntrée, a UK-based consultancy that offers free advice to those seeking to buy property. ‘We’ve had more and more enquiries from investors over the last month,’ she says. ‘Because of the state of the current market, it could be a really good time to buy, as you have good negotiating power.’